The Best Vs. the Rest: How Emulating Best Practices Can Improve Your Business

Top firms are also more aggressive in identifying and managing market threats, the most cited being finding new clients and coping with increased compliance demands and with poor investment performance. About 46% of average firms saw finding new clients as a threat, compared with 62% of top firms. Increased compliance was a threat to 42% of average firms, but to 51% of top firms. Poor investment performance was a threat to 22% of average firms, but to 30% of top firms.

When evaluating key drivers of growth over the next five years, top firms put a heavier emphasis on using existing clients as a referral source—58% versus 47% for the average firm. Top firms are also less likely than average firms to expect organic growth of the existing client base.

Top firms, taking a more nuanced view of the use of different types of assets or instruments, are more likely than average firms to select ETFs for factor or asset exposure or trading and transparency. They are more likely than average firms to use alternative investments for “a select few clients” and only half as likely as average firms to say they don’t use alternatives at all.

These findings may enlighten advisors about successful common traits of leading firms. But how are they put into practice? Below are a few suggestions that advisors may want to implement in their effort to become a top-tier firm.

• Know how you get your clients. Do you know where each of your new clients comes from? Do you know which method is the richest source of your new clients? For top-tier firms, referrals from existing clients are the best source of new clients. Loyal clients who are a good fit and are contributing to firm profitability are the most easily exploited source of similar clients. If referrals are the richest source of your new clients, and you’re not a top-tier firm, you may need to retool your approach—for example, by improving your communication methods or follow-up. The same is true if referrals are not currently your best source—but remember to keep up your efforts in other channels if those offer a lot of potential for your particular practice.

• Watch for threats to your business. Our research suggests that top-tier firms take a more aggressive approach to identifying and managing threats to their business; for example, they are considerably more likely to cite “finding new clients” or the need to “increase investment in technology” as major threats, placing a higher premium than average firms on finding new clients, perhaps because they have higher growth targets. Interestingly, top firms were less concerned with managing client expectations, suggesting that they are confident in the strength of their client relationships and their ability to work with clients regardless of what the market throws at them.

• Develop a comprehensive marketing plan. In reviewing the marketing mix, we noted that top firms plan to make more use of specific marketing methods than do average firms. Again, due to their higher growth rates, top firms may take a more aggressive approach to developing a marketing program. While the likelihood of having a written marketing plan was the same for both top-tier and average firms, the top firms’ plans featured more components, such as events marketing and direct mail. Top firms also are savvier about web marketing, such as optimizing search results and including webinars in their outreach.

You don’t have to be a top-tier firm to survive in today’s investment advisory marketplace. But to thrive, it helps to emulate the practices of the firms that stay ahead of the risks that threaten their business and that make the most of marketing plans and referrals.

Aiming for consistently high growth, profitability and performance won’t automatically make your firm the best, but it’s almost guaranteed to make your firm better.